How to approach an M&A deal? Of course, there are many nuances in the answer to this question. Therefore, we will consider the ultimate M&A checklist to describe the basic deal stages and points that should be considered during its preparation.
M&A deals in a business environment
The formation of market relations in the economy necessitates the introduction of new organizational and managerial structures, effective forms, and methods of combining the activities of companies. In many sectors of the economy, the importance of factors that push companies to various forms of coordination of their activities is growing. In the context of crisis management, mergers for many companies are becoming one of the promising areas of development and protection against unwanted acquisitions.
Mergers and acquisitions (M&A) is a natural method of raising capital that is positive for companies looking to grow. The main motives of M&A are the desire to grow; financial motives; access to specific company assets; technological changes (distribution of innovation costs, access to innovative technologies, etc.); synergy effect; diversification; search for new markets and increase market power; creation of a monopoly; quality improvement; classification and experience of management staff; simplification of national regimes for regulating the inflow of foreign investment.
M&A checklist: how to prepare for the sale of a company
All M&A agreements are unique in their way, so the allocation of individual stages in the agreements is quite conditional. Some stages may be missed, swapped, or merged. However, there is one key point in any M&A agreement: the signing of transaction documents by the parties (usually a contract of sale and some related documents).
Accordingly, the whole agreement is divided into two major stages: before and after signing. Within these two main stages, depending on the type of agreement, there is the following M&A checklist:
- Determine buyer motivation
Understanding the buyer's goal and how to achieve it will help you better formulate a sales strategy in the future. The buyer's goal is to increase the value of the acquiring company, which can be achieved, for example, by entering a new market or increasing its market share, by combining or using the resources of the acquired company. Think about what resources are most important in your company for a potential buyer?
- Develop a strategy
Understanding the useful resources of the company, we can begin to form a strategy. A company, especially a high-tech one, can be viewed as a product with a strategic advantage that satisfies the VRIO criteria – value, rarity, uniqueness, organization. This approach makes it possible to use the same approach when selling a company as when creating a marketing strategy for products or services.
- Gather basic documents
To start selling a company, you will need several basic sets of documents: a memorandum, a one-page description, and a non-disclosure agreement.
- Conduct due diligence
Conducting due diligence gives an objective idea of the invested object, it shows all possible investment risks, an unbiased assessment of the subject of investment, and other nuances.
- Structure the agreement
An important step that must be completed before signing the main contract is the structuring of the agreement. Lawyers should choose the optimal jurisdictions for the seller's and buyer's companies, which will formally become parties to the agreement.
In general, depending on the complexity of the agreement and the negotiating positions of the parties, the implementation of all these stages may take from several weeks to several years.